CFO Outlook: Onward and Upward

Finance chiefs are more optimistic than they were last quarter and plan to increase their spending in 2011, according to the latest Duke University/CFO Magazine Global Business Outlook Survey. The survey, which polled 848 finance executives worldwide and concluded December 10, finds nearly 50% of CFOs more optimistic about the U.S. economy than they were last quarter, with only 14% less optimistic. Fifty percent of finance chiefs also report improved optimism about their own companies' prospects compared with last quarter, while 18% are less optimistic.

This improved optimism should translate into some hiring, with CFOs planning to expand their U.S. full-time workforces by 2% over the next 12 months. The number, while still modest, is the largest expected increase in full-time domestic hiring recorded by the survey since 2006. John Graham, finance professor at Duke's Fuqua School of Business and director of the survey, says the move should add some 3 million jobs to the U.S. economy and will reduce unemployment below 9% during the coming year.

Finance chiefs also continue to broaden their offshoring efforts, planning to increase offshore outsourced hiring by nearly 5%. Domestic temporary hiring will rise by just half a percentage point.

CFOs expect to increase spending in other categories as well, with plans to spend nearly 9% more on capital expenditures than they did last year and nearly 5% more on technology. Both numbers represent a jump from third-quarter expectations. CFOs also say they will boost research and development spending by 4% and advertising spending by 2%.

Finance chiefs have been aggressively accumulating cash, with nonfinancial firms in the United States currently holding $1.9 trillion on their balance sheets. Half say they will begin to spend some of it in 2011. Of those who do plan to deploy cash, 65% say they will use it for capital projects and 34% plan to make acquisitions, while a third will pay down debt and a fifth will pay dividends or make share repurchases.

Of those CFOs who say they will continue to hoard their cash, half say they do not have any excess cash to spend. Another 37% say they continue to need a liquidity buffer, while 32% say they will hold on to their cash due to lingering economic uncertainty. A fifth say they see no attractive investment opportunities.

Abroad, finance chiefs in Asia and China are more optimistic than their U.S. peers, with 72% of Asian CFOs more optimistic than they were last quarter and 40% of Chinese CFOs more optimistic. Finance executives in both regions plan to step up their hiring, with Asian and Chinese CFOs looking to increase full-time domestic staff by 5% and 10%, respectively.

European finance execs, however, lag behind their counterparts around the world as many eurozone economies continue to struggle. Just 38% of European finance executives are more optimistic about their local economies than they were last quarter, while 27% are more pessimistic.